For me there is no cut-off even though I am a poster child for tax deduction opportunity. Let’s take the best possible case for buying now using borrowed funds and I’ll tell you why it doesn’t work for me.
My marginal tax rate is… I’m not sure exactly, but probably the maximum, 45% or so. So if I can borrow at 6%, and property taxes are another 1% minimum, and maintenance expenses are 1% minimum and I assume they are fully deductible, then I need to see annual returns of at least 4.4% after tax on the property to justify buying more than I can afford with just 100% cash. I don’t believe that 4.4% gross is a good bet in today’s local property market. I wouldn’t even feel very comfortable betting on 0% gross today.
